Yuan falls as trade battle escalates

Business | Reuters and Jimmy Ding 12 Jul 2018

The yuan weakened yesterday as the United States threatened more import duties on Chinese goods, sharply escalating the trade conflict between the world's two biggest economies.

Several traders said they saw some dollar selling by large state banks in the spot market, which went some way to supporting the yuan, though they did not know whether US dollar liquidity offered by the banks was on behalf of the central bank or corporate clients.

The onshore yuan opened at 6.6694 per dollar and was at 6.6674 at the official domestic close, down 0.4 percent for the day.

The offshore yuan was at 6.6848 per dollar after hitting a low of 6.6918, down nearly 0.5 percent on the day, at one point in early Asian trade.

"The Chinese yuan will have another 2 to 3 percent drop for the next half year. It is not because a slowdown of Chinese economy - it is mainly because the US dollar will stay firm and the capital market in the US is still strong," said Hou Wey Fook, chief investment officer of consumer banking and wealth management at DBS Bank.

Andy Wong, senior investment manager of Pictet Asset Management, said a weaker yuan is not an effective measure as it may hinder the currency's internationalization and the government would not weaken the yuan as a weapon in the escalating trade war.

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